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Apple Earnings Report Q4 - 2011 on October 18th, 2011

[10:07 PM] Robert: Bryan: Thank you for the opportunity to work with you on the call.
[10:06 PM] Robert: The call is now over. I will be in TMO's Apple Finance Board from now and into the evening for more commentary and discussions on the results. Robert Paul Leitao
[10:05 PM] Bryan: And we'll have detailed coverage of the top news to come out of the call at The Mac Observer. Thanks, everyone!
[10:05 PM] Robert: Tim Cook: 3GS price drop tested positively in select pre-paid markets ahead of the start of the September quarter.
[10:05 PM] Bryan: Thanks to Robert "DawnTreader" Leitao for joining me with our live coverage. You can find discussion of Apple's quarter report in our Apple Finance Board forum.
[10:04 PM] Bryan: Call is being wrapped up.
[10:03 PM] Bryan: Tim instantly dismissed the question, adding that Apple is pleased as punch with the iPad. He said, "I think we have a pretty good handle on what to do next [with the iPad."
[10:02 PM] Bryan: Chris Whitmore is asking about longer term iPad opportunity. Will Apple drive it up market to take more PC sales or down market to achieve broader sales?
[10:01 PM] Robert: As Bryan noted: Holding cash off-shore has big tax implications at this point in time. The off-shore positions (as Peter O. indirectly mentioned), would impact the cash available domestically for a share buyback. Tim Cook did not provide a direct response on the share buyback question from an analyst. Commentary: A share buyback is a board decision. It's not a decision solely for a CEO.
[10:01 PM] Bryan: Mac sales up 48% in Japan compared to September of 2010.
[9:58 PM] Bryan: He added that Apple wants iPhones in as many hands as possible because they think it's a great phone.
[9:58 PM] Bryan: Tim: "Not one that I've published." That's frakking funny.
[9:58 PM] Bryan: Analyst is asking for Apple's goal for the iPhone. Does Apple have a goal that is as audacious as its original 1% of the handset market goal? (Apple now has 5% of the handset market).
[9:56 PM] Bryan: TIm said Apple's pipeline is "unbelievable."
[9:55 PM] Robert: Peter O: More than 2/3s of cash is currently held off shore.
[9:55 PM] Bryan: $81 billion in cash on hand. $54 billion of that is off0shore This relates to taxation issues that keeps more than a trillion dollars in U.S. corporate profits outside the U.S.
[9:55 PM] Robert: Tim Cook: Apple desires to maintain flexibility with its cash reserves. Tim is not "religious" on the cash balances and the company will do what's best for Apple with Apple's cash.
[9:55 PM] Bryan: "That said, I'm not religious about holding cash or not holding cash." This is the first indication that there is even room for doing anything with its money.
[9:54 PM] Bryan: Moving on to cash, he said that Apple's team has done quite well with its cash. He said that Apple has used money to build out stores, do product tooling, and that it bought a few companies.
[9:53 PM] Bryan: He added that he thinks there is more cannibalization of PCs. He quipped that with a record Mac quarter, he hoped to see more cannibalization like that.
[9:53 PM] Bryan: He also asked about PC cannibalization. Tim said some people are choosing to buy an iPad instead of a Mac, but that the Mac still had a record quarter.
[9:52 PM] Bryan: He's asking about Apple's cash. Will Apple be doing a dividend? People keep asking, and Apple keeps saying no.
[9:51 PM] Bryan: Merrill Lynch analyst up now.
[9:50 PM] Robert: More than half of the 20% sequential gain in iPad unit sales to 11.123 million units was due to channel inventory expansion.
[9:49 PM] Bryan: In other words, there is still room to grow. He said that iPad demand continues to grow.
[9:48 PM] Bryan: Tim said Apple is in 90 countries with iPad. I think he said there are 48,000 iPad points of sale, compared to 90,000 on iPad and 120,000 on iPhone.
[9:47 PM] Bryan: New analyst asking about iPad distribution. Also asked about emerging markets. What does Apple need to do to grow sales in China, Russia, India, Middle East, etc?
[9:45 PM] Bryan: Tim basically said that Apple is still assessing the impact of Thai floods.
[9:44 PM] Bryan: Richard Gartner is up next. Asking about component pricing. Also asked about unibody pricing and problems in Asia.
[9:44 PM] Robert: Tim Cook in response to question on the 3GS handset: Apple has reduced the price to $0 on post-paid contracts in a number of regions and also lowered the price on the original iPhone 4. The decision to lower the price on the 3GS is to benefit sales in both the pre-paid and post-paid handset markets.
[9:42 PM] Bryan: Tim: Yes. Also, the sky is blue.
[9:41 PM] Bryan: Moving on to the iPhone 3GS. Does Apple see getting new customers from new, lower prices?
[9:41 PM] Bryan: Tim said that Apple works hard to innovate and doesn't like it when people steal those ideas. Tim wouldn't offer specific commentary on the company's goals.
[9:41 PM] Robert: Commentary: The 26% Mac unit sales gain in the quarter (29% revenue gain) is the one bright spot in the quarter and the rate of unit sales growth was a multiple of global PC market unit sales growth.
[9:40 PM] Bryan: New analyst is asking for Apple's goals in the Patent Wars (i.e. Android). Is Appel's goal to get injunctions or to get royalties?
[9:39 PM] Bryan: Tim said there will be an overall industry shortage of hard drives, and he wouldn't say specifically how that will impact Apple, but said that internally, their expectations were included in their projections for December.
[9:38 PM] Bryan: Same analyst asked about Thailand floods and the effect of those floods on Apple's supply chain. Tim Cook said that the Mac has the biggest exposure.
[9:38 PM] Robert: AAPL now off almost 7% in after hours trading and remains well under $400.
[9:37 PM] Bryan: Tim said that Siri is a big deal and that customers dig it. It was a non-answer, but then the question was poorly worded.
[9:37 PM] Robert: Software, Service revenue rose only 10% year-over-year no matter the release of Mac OS X Lion. This revenue line now includes revenue from the Mac App Store.
[9:37 PM] Bryan: New analyst asked about Siri. Is it a feature or a differentiating factor for Apple?
[9:36 PM] Bryan: PEter didn't offer specific numbers for iPad.
[9:36 PM] Bryan: Ben is asking about iPad guidance for December and March. PEter demurred on March. He said he expects Apple to set new iPad records in December. Same with Macs.
[9:34 PM] Bryan: Ben Reitzes is asking about the impact of rumors on sales. Tim said the he believes it was "substantial."
[9:33 PM] Bryan: He called iPad "a huge opportunity for Apple over time."
[9:33 PM] Bryan: TIm thinks that the tablet market will be bigger than PC market in the future.
[9:32 PM] Robert: In response to a Gene Munster question: Apple deferred new carrier expansion in the September quarter in anticipation of the release of the iPhone 4S.
[9:32 PM] Bryan: Peter said that it was early in the October quarter and that the product rollout was behind them. In other words, look for new carriers later this quarter.
[9:31 PM] Bryan: New analyst asking about new carriers for iPhone. Peter Oppenheimer noted that Apple didn't add any carriers in September because of the impending iPhone 4S.
[9:31 PM] Bryan: Tim: "I feel very, very confident in our ability to compete," and very confident in the company' pipeline.
[9:30 PM] Bryan: Tim noted that Apple owns the tablet market with its iPad, thank you very much, and implied they are not worried about crappy, low end devices.
[9:30 PM] Bryan: Same analyst asked TIm's thoughts on the Kindle Fire offering a limited functionality device (the Kindle Fire). The implication is what will Apple do about it?
[9:29 PM] Bryan: Tim added that this has contributed to Apple's gross margins.
[9:29 PM] Robert: Tim Cook: Apple is leveraging the company's strong balance sheet for strategic purposes in expanding product supply.
[9:29 PM] Bryan: Tim said that Apple's approach is to do business with as few companies as possible so that they can "go in deep" with those companies and find ways to innovate.
[9:28 PM] Bryan: A new analyst, missed the name. He asked about double sourcing components in Apple's supply chain.
[9:27 PM] Robert: Commentary: Tim Cook mentioned Brazil revenue rose 118%. This leads to questions about performance in other areas of the Americas.
[9:27 PM] Bryan: He came back to it saying that "the sky's the limit" in China. He also said Brazil is growing fast.
[9:27 PM] Bryan: He said that China is quickly rising to be the #2 country in terms of revenue. He equivocated on saying that China can actually equal the U.S. for Apple, but I personally assume it will.
[9:25 PM] Bryan: "Certainly in my lifetime I've never seen a country with so many people rising into the middle class," Tim Cook said.
[9:25 PM] Bryan: Tim said China is growing at a "feverish pace." He painted the a vision of Apple's China presence still being nascent.
[9:24 PM] Bryan: Katy also asked if China could be as big as U.S. for Apple. Tim says China is now 12% of Apple's sales in 2010, 16% just in the September.
[9:23 PM] Bryan: Apple is typically very conservative in its guidance, making it easier to "surprise" on the up side. Peter basically gave a non answer to Katy's question.
[9:23 PM] Robert: Reduction in sell-through demand for the original iPhone 4 occurred late in the September quarter and in anticipation of the new handset model.
[9:23 PM] Bryan: She asked why Apple is only guiding for 40% gross margins considering how many iPhones Apple expects to sell.
[9:22 PM] Bryan: Tim Confident that iPhone sales will hit a new record in December. Moving on to Katy Huberty.
[9:20 PM] Bryan: Tim Cook answered that he is confident and that Apple has a solid supply He declined to predict when Apple would see supply/demand balance.
[9:19 PM] Bryan: Analyst questions have begun. Bill Schulman from Goldman Sachs asked if Apple was confident in its iPhone 4S production.
[9:19 PM] Robert: In after hours trading the shares have again fallen below $400.
[9:18 PM] Bryan: Fiscal 2010 was the first year Apple did $100 billion in sales. Stunning.
[9:18 PM] Robert: Commentary: The retail store performance is underwhelming and the company's decision to moderate iPad ending channel inventory needs explanation.
[9:18 PM] Bryan: Guiding for 40% gross margins for December quarter.
[9:17 PM] Bryan: 357 Apple Stores open during the quarter.
[9:16 PM] Robert: The company ended the September quarter with 357 retail stores world wide.
[9:15 PM] Bryan: 357 Apple Stores open during the quarter.
[9:14 PM] Bryan: Retail revenues up 1% year-over-year. Peter said the year-over-year comparison is tough because iPhone 4 was launched during the September 2010 quarter. He said the Mac kicked butt.
[9:13 PM] Bryan: PEtere claims 250 million iOS devices sold. This is a shot at Google's claim of 190 million Android phones.
[9:13 PM] Robert: There was a 21% drop in revenue in Japan and both the Americas and Europe reported revenue growth below the company wide average of 39%. The Americas reported revenue growth of 34% and revenue growth in Europe was 36%. These numbers are exclusive of the retail stores located in those regions.
[9:12 PM] Bryan: 92% of Fortune 100 are testing iPad, up from 86% last quarter.
[9:11 PM] Bryan: iPad is being distributed in 90 countries, with 28 new countries added during the September quarter.
[9:11 PM] Bryan: Moving on to iPads.
[9:10 PM] Bryan: Lowes is rolling out 40,000 iPhones to sales associates with an app to help them find stuff in the store.
[9:09 PM] Bryan: Peter is touting consumer satisfaction for iPhone. Also said 94% of Fortune 500 are deploying or testing iPhone.
[9:08 PM] Bryan: $11 billion in recognized revenue from iPhone.
[9:08 PM] Robert: The iPod line represented less than 4% of revenue. Except for the December quarter and seasonal sales strength, the iPod is no longer a meaningful factor in results.
[9:07 PM] Bryan: iPhone sales doubled, DOUBLED, in Asia-Pacific.
[9:07 PM] Bryan: iTunes revenue was $1.5 billion, a new record. $180 million iBooks have been downloaded.
[9:07 PM] Bryan: iPod touch accoutns for more than half of all iPod sales. iPod is still tops in MP3 players.
[9:06 PM] Bryan: Record desktop sales are included int he numbers, which Robert noted below. Peter specifically cited iMac strength for desktop success.
[9:06 PM] Robert: The retail stores sold more than 1 million Macs in the quarter. This is the first time the stores have exceeded 1 million Macs units sold in a quarter.
[9:05 PM] Bryan: Apple's Mac sales growth crushed PC sales growth.
[9:04 PM] Bryan: Ah, Peter Oppenheimer is leading the by-the-numbers spiel after all.
[9:03 PM] Bryan: Tim Cook is making the introductory remarks, something usually done by Tim Cook. He is reading a statement about Steve Jobs.
[9:03 PM] Robert: Mac laptop sales rose 37% versus 3% growth in desktop unit sales.
[9:02 PM] Bryan: Getting the standard disclaimer.
[9:02 PM] Robert: Asia-Pacific (exclusive of the retail stores and Japan) represented 23% of total revenue. This is the one bright spot among Apple's 5 regions. Asia-Pacific revenue rose 139%.
[9:01 PM] Bryan: The call is about to begin.
[8:59 PM] Robert: The retail stores posted a 25% increase in Mac sales in the quarter but only a 1% gain in revenue. The lack of a real revenue gain for the stores in the quarter considering the increase in the number of stores year-over-year will need an explanation during the call.
[8:54 PM] Robert: The September quarter revenue results represent a sequential drop in revenue of about $300 million or about 1.1%.
[8:52 PM] Robert: In after hours trading AAPL has partially recovered to $406 per share on the back of strong guidance for the December quarter. The December quarter will have 14 shipping weeks versus 13 shipping weeks in a conventional quarter.
[8:50 PM] Robert: For the December quarter Apple is guiding to revenue of $37 billion and eps of $9.30 per share. Guidance is above Street expectations.
[8:47 PM] Robert: AAPL has fallen below $400 in after hours trading as the market responds to results that are below expectations.
[8:44 PM] Robert: In the quarter Apple reported the following unit sales: 17.07 million iPhones 11.12 million iPads 4.89 million Macintosh computers 6.62 million iPods
[8:43 PM] Robert: The results have been posted. Earnings of $7.05 per share on revenue of $28.27 billion.
[8:33 PM] Robert: IDC and Gartner have already signaled robust Mac unit sales growth in the quarter and Apple's ability to satisfactorily fill the global channel with iPad supply will heavily influence that product's reported unit sales in the period.
[8:30 PM] Robert: Apple's September quarter conference call with analysts begins in about one-half hour.
[4:16 AM] Bryan: Getting ready for live coverage on Tuesday.
[2:10 AM] Adam: Our live coverage of the Apple FY 11 Fourth Quarter Results Conference Call will begin tomorrow (10/18) at 5:00 PM EDT
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